Contractor's Bid Rejected for Unresponsiveness

New York’s competitive bidding statutes require contracts for public work to be awarded to the lowest responsible and responsive bidder. The statutes are designed to reject a contractor who is unqualified or whose bid is not responsive to the criteria in the request for bids. Although the law does not define “responsible”, it has been interpreted as meaning that the low bidder has sufficient skill, experience, financial resources and integrity to perform the contract. Bid responsiveness, on the other hand, is the factor most likely to cause problems in the bid selection process, as shown in the recent case of Matter of Framan Mechanical, Inc. v State University Construction Fund.

Background

In November of 2015, the State University Construction Fund (“SUCF”) solicited bids for HVAC upgrades at SUNY Downstate Medical Campus. The bid specifications required the bidders to “demonstrate, to the satisfaction of [SUCF], that it has successfully completed one (1) contract of similar size, scope and complexity to this contract within the last five (5) years”. Framan submitted a bid that identified certain work at the SUNY Stony Brook Life Sciences building, completed earlier that year, as it’s prior similar project.

After reviewing Framan’s prior project, the SUCF advised Framan that the prior project did not “satisfy the requirements for size, scope and complexity”, as defined in the request for bids. SUCF provided Framan with the opportunity to provide information about another similar project. However, rather than provide information about a different project, Framan submitted a detailed explanation as to how the prior project at Stony Brook was, in fact, a similar project. The SUCF ultimately rejected Framan’s bid as unresponsive because the prior project was not successfully completed and poorly performed. Framan commenced an Article 78 proceeding challenging SUCF’s determination to reject its low bid.

Decision

In its petition, Framan argued that its prior project was indeed similar to the project under bid, and that the issues claimed by SUCF were fabricated to cover the actual reason for the SUCF’s determination, which was retaliation against Framan for its commencement of a breach of contract lawsuit seeking nearly $3,000,000 from SUCF arising out of that prior project. In opposition, SUCF submitted evidence showing that the prior project was quite complicated because the existing equipment that maintains temperature and humidity controls in the laboratory spaces to be upgraded were, by the nature of their use, sensitive to disruption. Adding to the complexity, the project under bid had to be completed in phases in a building that would require continuous cleaning in light of its use as an active laboratory and animal research facility, and would have to remain occupied throughout the project.

In light of the sensitive nature of the project under bid, the court relied on SUCF’s determination of a “‘pattern of violation of contract requirements’ including ‘(1) [f]ailure to complete the [prior] project on time; (2) [f]ailure to complete project work, requiring [ SUCF] to hire contractors to complete the work; (3) [r]epeated failures to follow directions from [ SUCF] and its consultant; (4) [f]lagrant safety violations; (5) [c]onsiderable disruption to building occupants, including numerous building evacuations and building service outages; (6) [f]ailure to keep the project site clean; (7) [f]ailure to comply with permit requirements resulting in permit revocation and stop work orders being issued[;] and (8) [p]roperty damage to the project and campus’”. Accordingly, the court found that SUCF had a sufficiently rational basis to reject Framan’s bid as not responsive because it determined that the prior project was not a “similarly successfully completed project”. As to Framan’s claim of retaliation, the court noted that the fact of the Framan’s breach of contract lawsuit was not evidence of retaliation by SUCF but, rather, evidence that the project was not successfully completed. The appellate court affirmed the lower court’s dismissal of Framan’s petition.

Comment

Public agencies have broad discretion in determining what constitutes compliance with the bid documents. Here, the agency’s determination that the prior project was not successfully completed was supported by ample evidence and, therefore, was neither arbitrary nor capricious. This case demonstrates yet again that a court will not substitute its judgment for that of the contracting agency unless its decision was irrational, dishonest or otherwise unlawful.

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